Heading into 2027, growth is showing in various markets of importance to the fluid power and motion control sectors.

Construction is benefitting from the current data center boom, global defense spending is on the rise, and manufacturing is in a growth phase. These sectors are all presenting growth opportunities for the hydraulic, pneumatic and electromechanical technology suppliers serving these markets.

At the beginning of 2026, Power & Motion asked readers what market segments they saw the most opportunities in this year. Not surprisingly, construction equipment, defense and manufacturing equipment were the top three choices indicated, which can be seen in Figure 1 below.  

Growth in these sectors is expected to continue into 2027. So, we’ve decided to dive into these markets to help you better understand what is driving their growth and what specific opportunities they may present in the year ahead.

Data Centers Giving Construction Industry a Boost

Improving conditions in the construction industry, driven primarily by the influx of investments in data centers, makes it a key sector to watch going forward.

Nico Palesch of Oxford Economics, who spoke during the National Fluid Power Association’s (NFPA) 2026 Industry & Economic Outlook Conference (IEOC), said the past couple of years were particularly bad for the construction sector across the board.

This was due to many factors, but in particular the rise in interest rates that occurred in the 2022-2023 timeframe.

However, that situation is turning around slowly and construction is the sector Oxford Economics is more optimistic about over the next couple of years, he said. “We've seen really clear signs of it in Europe. We've seen signs of bottoming out in North America, especially in residential,” he said. “And so we do expect there to be greater strength heading into next year.”

Aiding this, particularly in the U.S., is the data center boom which has prompted a lot of construction activity. Data centers are being built all over the world, but the U.S. is outpacing all of them “and it is reaping huge amounts of benefit from this,” said Palesch. “Not only in terms of direct construction output, but [this is] also spilling over into different industrial inputs and segments as well” such as the cooling and other componentry used in these facilities.

Daniel Winter, President of Danfoss Power Solutions, said in an interview with Power & Motion that the majority of the growth the company has seen so far in 2026 has come from its data center business which supplies hoses, fittings and other components used in these facilities' cooling systems.

Read the article “Hydraulics and Pneumatics Play Important Role in Data Center Cooling” to learn more about how fluid power components are used in data centers.

Though there are some questions about how long the data center boom will last, Winter said he does see it as a long-term trend. Construction of these facilities is developing differently in different parts of the world, with demand potentially shifting to other regions such as Europe in the future.

While growth rates related to the data center market may not be what they are now, he still anticipates they could be in the range of 20%.

Construction Equipment Demand Increasing in Line with Improving Market Conditions

Increased construction of data centers means there is also more demand for the machinery that builds these facilities.

This is leading to improvements in unfilled orders and inventories for equipment manufacturers, a lot of which is driven by the growth in data centers said Alastair Hayfield from Interact Analysis during his presentation on the construction equipment market at the NFPA IEOC 2026.

Construction of these facilities and the surrounding infrastructure also typically rely on larger equipment, which is benefitting that segment of the market while compact machinery is still struggling noted Hayfield.

He said Interact Analysis is forecasting growth for the construction equipment market in 2026 and 2027. “This is largely driven by the data center boom — rental fleets and big contractors looking to procure equipment for those projects,” said Hayfield. “It's not being driven by big increases in residential, warehousing or factory starts.”

Taylor St. Germain from ITR Economics, on the other hand, said during his NFPA IEOC 2026 presentation that ITR expects commercial construction to come back in 2027, which should bode well for equipment demand as well.

“You’re starting to see building activity pick up, commercial property prices are starting to rise again. There’s a lot of reasons to be more excited about commercial [construction] in 2027,” he said.

He did agree with Hayfield though that residential construction will continue to struggle due primarily to ongoing affordability issues. Interest rates remain high, which is making it more expensive to purchase or build a home.

Ken Baker, CEO of Bailey International, told Power & Motion that the construction market, particularly related to data centers and infrastructure, appears to be steady. And he expects infrastructure-driven construction to stay reasonably strong into 2027 due to investments being made in this area — which will continue to prompt demand for construction equipment and the components used in it like hydraulics.

Increased Global Defense Spending Will Benefit Range of Technology Suppliers

Defense is expected to be another positive market going forward for those who serve this sector. Many countries and regions around the world, like Europe, are increasing their defense spending due to the persistence of various geopolitical events.

Palesch said defense spending will be a key growth driver for the European market as it looks to build up its military fleets. “This will help European industry in a very big way because, as part of this, they are going to spend more money on their own domestic manufacturers because for them they see this as a sort of matter of survival and security,” he said.

The majority of this European defense spending will be focused on:

• Aerospace
• Precision & Optical Instruments
• Ships, Military Vehicles and Rail.

Winter said defense is an opportunity area Danfoss is exploring because of the growth potential the company sees in this market. He sees opportunities for the company’s electrification technologies in marine vessels as this sector has been pushing toward use of such technology in recent years. Land-based military vehicles have traditionally relied on hydraulics technologies and therefore he sees potential in the company being able to provide its hydraulics solutions for these applications.

Several members of the fluid power industry Power & Motion has spoken with throughout the year have also noted defense as a market they are either looking into or have already started to work in more.

Other technology suppliers are seeing opportunities in this market as well.

Anant Bhat, Director of Business Development – Bearings & Industrial Solutions Americas at Schaeffler, noted in an interview with Power & Motion defense is one of the industries in which the company has seen robust demand in 2026. He said there has been strong demand for the company’s high-precision bearings for engines and auxiliary power units from this sector, which is expected to continue into 2027.

Manufacturing Activity is on the Upswing

According to ITR’s St. Germain, manufacturing is in a growth phase which is expected to continue into 2027.

The Institute for Supply Management (ISM) Manufacturing PMI marked its 10^th consecutive month of expansion in October 2026, further demonstrating the growth occurring in the manufacturing sector. Growth was recorded in 12 manufacturing industries during the month, with five of the six largest industries expanding in October:

• machinery
• computer & electronic products
• transportation equipment
• chemical products and
• food, beverage & tobacco products.

Growth is projected to continue in these and several other manufacturing sectors going into 2027 and beyond. Electronics, pharmaceuticals, aerospace, mining equipment as well as industrial and metalworking machinery are among those Scott Hazelton from S&P Global Market Intelligence pointed to during his presentation at the NFPA IEOC 2026.

Semiconductors to be a High-Growth Sector

Production of electronic components, particularly semiconductors, is expected to provide strong and steady growth for the manufacturing sector going forward.  

Hazelton said semiconductors are a good place to be over the coming years with high growth rates expected through 2030. Data center construction is helping drive the need for these components as semiconductors are used for much of the data processing that occurs in these facilities.

The CHIPS Act helped drive a lot of investment in domestic production of semiconductors. Hazelton noted in his presentation that many of these facilities are now starting to come online, which will help meet future demand for semiconductors.

Buildup of these facilities has also driven the need for technologies capable of producing semiconductors, which Chelsea Krause, Vice President, Fluid & Motion Control at Emerson, expects will continue to provide opportunities in the years ahead.

She said the rapid growth of semiconductor manufacturing is creating demand for the equipment and automation technologies needed to produce semiconductors. As pneumatics and motion control play an important role in these production technologies, Krause said Emerson expects this sector will remain an attractive area for innovation and growth going forward.

Read the article “Why Pneumatics are a Good Fit for Semiconductor Production” to learn how pneumatic technologies are used to manufacture semiconductors.

Defense Spending to Benefit Aerospace and Other Manufacturing Industries

As noted above, increased defense spending around the world is expected to be an opportunity for many, including from the manufacturing side of things.

When Palesch discussed the growth defense investments are expected to bring, he showed a chart demonstrating how Germany’s manufacturing forecast improved over the next several years due to announced defense spending commitments. 

A recent report from Interact Analysis corroborates this, indicating the country’s aerospace and defense sector is entering a new investment cycle to meet Europe’s increased defense spending. It notes several German manufacturers who are investing in manufacturing facilities to meet this demand.

Hazelton noted defense spending is a strong contributor to the projected growth for the U.S. shipbuilding sector in the years ahead.

Defense spending is also benefitting the aerospace sector, with Hazelton saying that defense orders were up 21% in the first half of 2026. Overall, U.S. aerospace production is expected to see steady growth in the years ahead as demand from the commercial side increases as well with companies like Boeing currently projecting strong demand for new aircraft through 2045.

Read the article “Global Aerospace Actuator Market to Grow 3.2% Through 2034” to learn how future growth of the aerospace market will help drive demand for the actuators used in these vessels.

Scott Curley – Senior Vice President, Sales and Marketing at Regal Rexnord, said in an interview with Power & Motion, the company is seeing significant momentum in the aerospace industry. This will drive the need for precise, reliable motion solutions required by various aircraft applications, and he expects this sector to be an opportunity area for Regal Rexnord in 2027.