Growth in the non-farm economy ended 2006 at a relatively strong pace. Non-farm GDP was estimated to have risen by 1.4 per cent in the December quarter, lifting year-ended growth to 3.5 per cent. The strength in output growth implied a pick-up in measured productivity growth after an extended period of apparent weakness. Recent data suggest that the economy has continued to grow in the early part of 2007. Retail trade rose at a firm pace in the first two months of the year, and employment also expanded at a healthy rate. Business surveys show strong trading conditions in the March quarter. One area of weakness is the farm sector, where the drought has resulted in sharply lower production and incomes. Farm GDP is estimated to have fallen by around 20 per cent over the second half of 2006, directly subtracting 0.6 percentage points from overall GDP growth, while farm incomes have fallen even more significantly. Growth in the resource-rich states of Western Australia and Queensland has continued to outpace that in the rest of the country though the gap may be narrowing.