Non-oil private sector activity hit another record low in January, according to data released by Markit. The PMI reading stood at 53.9 in January, down from 54.4 in December, hitting the weakest reading since the index was established in 2009. The expansion was slower than the average of 55.4 in 4Q2015 and 57.3 in FY2015. The Index, however, remains in an expansionary mode despite the slowdown and further slump in oil prices.   4Q2015 weakness sustained in January: Slower economic activity that we saw in the last quarter of the year as the government froze investment spending has extended into the beginning of 2016. The reading likely points to a slow start of the year for government spending, in line with the easing of project awards we saw in the last few months of 2015. Uncertainty about government spending in the medium term, including levels of subsidy, may also be weighing on investment. The survey also showed that weak external demand contributed to the lower PMI reading, with exports expanding by nearly the slowest pace on record. Input purchases eased and so did inventory accumulation, in line with slower activity, though some panelists reported restocking of inventory in anticipation of a pick-up in demand over the coming few months. On a positive note, and in line with still-expanding activity, the economy was able to generate jobs in January at a higher pace than the previous month.   Muted cost environment: Input costs remained largely unchanged from December’s depressed levels, and markedly lower than 2015’s average, despite the recent increase in fuel and electricity prices as part of the government’s fiscal consolidation measures. Stable input costs may reflect disinflationary pressures due to the strong SAR, which is pegged to the USD. The muted inflation environment comes in line with anecdotal evidence that companies have not adjusted their output prices despite the higher energy costs. Government companies are absorbing the price hike while private sector companies are likely to look for government guidance before moving to adjust their output prices. We, therefore, continue to expect only modest pick-up in inflation for the coming few months.   Maintain slow real non-oil GDP growth forecast: General economic activity remains in line with our expectation of decelerating non-oil GDP growth on lower government spending and further declines in oil prices that are weighing on confidence. We therefore maintain our real non-oil GDP growth forecast of 2.8% for 2016, down from 3.6% in 2015 and the lowest in more than 15 years. (Market, Mohamed Abu Basha)