Real economic growth slowed to a 0.2% sequential pace (0.8% annualized) in the third quarter of 2006. As consumption decreased， the main contributor to growth shifted from private demand to net exports. Consumption has failed to take the place of investment-led growth due to the low growth of wages. In the first half of fiscal 2007， exports and nonresidential investment will decelerate as the U.S. economy weakens. But the economy will perk up in the second half as exports and output recover and investment regains momentum. We predict the economy will grow 1.8% in fiscal 2006 and 1.6% in fiscal 2007. Risk factors include the sudden slowdown of the U.S. economy and sharp depreciation of the dollar.