Higher rates locked in

<p>Kia ora,</p><p>Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news US payrolls rose much more than expected, reinforcing market expectations the Fed will raise rates at its next meeting.</p><p>But first, we start today with something we don't usually track. Indonesia’s <a href="https://www.bps.go.id/pressrelease/2022/02/07/1911/ekonomi-indonesia-triwulan-iv-2021-tumbuh-5-02-persen--y-on-y-.html" target="_blank"><strong>GDP data</strong></a> showed that the economy returned to its pre-pandemic size in Q4-2021, expanding +5.0% from the same quarter a year earlier, as the recovery regained momentum after the setback from the Delta wave in Q3 (+3.5%).</p><p>In China, according to the private <a href="https://www.markiteconomics.com/Public/Home/PressRelease/8dbcb7bf326a41188009c51a8a6569ad" target="_blank"><strong>Caixin services PMI</strong></a>, business activity is now barely expanding with momentum slowing to a five-month low. Lockdowns affected them but new orders slowed as well. Their employment measure is in fact now contracting in the service sector. This report is is very similar to the <a href="http://www.stats.gov.cn/tjsj/zxfb/202201/t20220130_1827161.html" target="_blank"><strong>official services sector PMI</strong></a>.</p><p>Meanwhile China has <a href="https://www.gazprom.com/press/news/2022/february/article547478/" target="_blank"><strong>signed</strong></a> a 30 year deal for Russian gas. It is a lever Russia is holding over the EU, just at a time the Chinese are trying to woo some EU countries, like Poland. China might end up a stabilising influence on Moscow's Ukrainian ambitions - or they could accentuate the pressures.</p><p>In the EU, their <a href="https://ec.europa.eu/eurostat/documents/2995521/14245712/4-04022022-AP-EN.pdf/a2b58a6b-3a40-e22f-e8a5-fd9e6713efbe?t=1643905149132"><strong>retail sales data</strong></a> f