Is Germany still the champion?

Investors saw dark clouds building on Friday after a Malaysian airlines jet was shot down at the Ukraine-Russia border and Israel launched a ground offensive in Gaza. That depressed shares and other risk assets, but the events are yet to disturb economic forecasts.

“We’ve seen a delayed impact of China and the Ukraine crisis,” said ING economist Carsten Brzeski. “This is an explosive cocktail, but right now with limited impact on growth. The Ukraine/Russia issue was already there.”

In a week relatively light on U.S. indicators, economists are looking for further signs that Europe’s recovery and even German growth may be stalling, putting more pressure on the European Central Bank to act.

Across the Channel, minutes from the Bank of England may be the last to show unanimous backing for a stable bank rate of 0.5 percent. The case for tightening may then be reinforced by second quarter GDP estimates likely to show solid growth.

For Germany, the views of purchasing managers (PMIs) on Thursday and of company chiefs surveyed for Friday’s influential Ifo report should show whether a slowdown of Europe’s largest economy detected in the second quarter has spread to the third.

Weakness in German industrial output and both domestic and foreign orders have pointed to a poor April-June period after 0.8 percent expansion in the first three months of the year, the fastest rate in three years.

Last week’s ZEW index of analyst and investor morale for July, which dropped this month to its lowest level since December 2012, suggested that the third quarter had also started shakily.

Forecasts for German manufacturing and services PMIs are broadly stable this month from last, with a third consecutive decline expected for Ifo’s business sentiment index, albeit only a slight dip following a sharper than expected fall in June.

“Latest data have been on the soft side and it has really raised people’s attention,” said Reinhard Cluse, chief European economist at UBS. “But we believe the German economy is still very solid and healthy and we believe this is a breather, not the first signs of a clear deceleration.”

LAST UNANIMITY AT BANK OF ENGLAND?

The Bank of England publishes minutes of its July meeting on Wednesday which will be scrutinized for any signs of growing unease among policymakers at the prospect of keeping interest rates at a record low while Britain’s economy recovers quickly.

The bank last month expressed surprise at some financial market prices it said implied a relatively low probability of a rate increase this year.

Many economists expect some members of the Monetary Policy Committee to break ranks and vote for a rate hike, especially if a jump in inflation in June proves not to have been a blip.

British inflation surged to a five-month high of 1.9 percent in June and house prices rose at their fastest pace in a year, prompting investors to increase bets on a rate rise before the end of 2014. The consensus is for a first hike in November.

Gross domestic product data due on Friday is expected to show that Britain’s economy finally regained its pre-crisis size in the second quarter of this year, much later than the United States and other big European economies.

A Reuters poll of 25 economists forecasts a repeat of the 0.8 percent quarterly expansion of the first three months of 2014, though some economists have said growth may fail to match that level after some weaker than expected data in recent weeks.

U.S. CONSUMER, HOUSE PRICES MUTED

Across the Atlantic, consumer price inflation is seen pulling back to 0.3 percent month-on-month in June from 0.4 percent in May.

May’s price rises, the largest in more than a year, may have reassured Fed officials who had expressed concerns that inflation was too low.

However, Federal Reserve Chair Janet Yellen told the Senate last week that early signs of a pickup in inflation were not enough for the Fed to accelerate its plans to raise interest rates, a move currently expected in mid-2015.

While data on economic activity and jobs have been broadly positive, there are mixed signs from the housing market, struggling since a rise in mortgage rates caused it to stall in late 2013.

New home starts fell in June to a nine-month low, but permits are running ahead of starts, which suggests building activity will pick up in the months ahead.

Housing price figures for May are due on Tuesday after declines of annual home price inflation for eight of the nine months to April.

CHINA EXPANSION, NZ RATE HIKE

In China, the first round of monthly PMIs, due on Thursday, should show whether the world’s second largest economy is stabilizing thanks to Beijing’s measures to shore up growth.

The preliminary HSBC PMI survey showed in June that factory activity expanded for the first time in six months.

The July index will come a week after data showing China’s economy grew slightly faster than expected in the second quarter while new home prices fell in June for a second straight month, prompting speculation about further state stimulus.

For actual central bank action, New Zealand offers the best hope. Its Reserve Bank increased rates in March for the first time since 2010 and is seen carrying out a 0.25 percentage point hike on Thursday, although a dip in inflation could make it a close call.-Reuters