In macroeconomics, the secondary sector of the economy is an economic sector in the three-sector theory which describes the role of manufacturing. It encompasses the industries which produce a finished, usable product or are involved in construction.
This sector generally takes the output of the primary sector (i.e. raw materials) and creates finished goods suitable for use by other businesses, for export, or for sale to domestic consumers (via distribution through the tertiary sector). Many of these industries consume large quantities of energy and require factories and machinery; they are often classified as light or heavy based on such quantities. They also produce waste materials and waste heat that may cause environmental problems or cause pollution (see negative externalities). Examples include textile production, car manufacturing, and handicraft.
Manufacturing is an important activity in promoting economic growth and development. Nations that export manufactured products tend to generate higher marginal GDP growth which supports higher incomes and marginal tax revenue needed to fund quality-of-life initiatives such as health care and infrastructure in the economy. The field is an important source for engineering job opportunities. Among developed countries, it is an important source of well-paying jobs for the middle class to facilitate greater social mobility for successive generations on the economy. Currently, an estimated 20% of the labor force in the United States is involved in the secondary industry.
The secondary sector depends on the primary sector for the raw materials necessary for production. Countries that rely on agriculture and other raw materials i.e. (primary sector), grow slowly and remain under-developed or developing economies. The value addition after the processing of goods creates for higher profitability, which accounts for the growth of developed economies.