By Jonathan Cable
LONDON (Reuters) - Economic indicators are this week expected to show signs of continued, if modest, progress in much of the world -- all of which could be blown off course if the standoff between Greece and its lenders leads to a rupture in the euro zone.
The currency bloc has been a millstone around the neck of the world economy since the financial crisis began and the ongoing drama surrounding Greece and its ability to repay its debts has added to that burden.
Athens delayed a key debt payment to the International Monetary Fund on Friday, branding as "absurd" the terms of a proposed aid deal from lenders.
"Greece's continued resistance to its creditors' demands on key sticking points like pensions, coupled with the missing of Friday's IMF payment, suggests that the risks of a Greek euro exit are still climbing," said Jonathan Loynes, chief European economist at Capital Economics.
A G7 summit starts later on Sunday with the meeting focussing on global growth, climate change and the ongoing sanctions against Russia. Add to this Greece, which is not officially on the agenda but which is bound to be a major theme for world leaders on the sidelines.
After positive job data from the U.S. on Friday focus this week will be on the European countries releasing industrial production numbers -- largely expected to show accelerating output -- and revised GDP numbers which are likely to confirm euro zone economic growth was subdued at the start of the year.
"However, forward-looking indicators, such as real narrow money, suggest a sharp acceleration in industrial production growth in the next 12 months," economists at Credit Suisse (SIX:CSGN) wrote in a note to clients.
On Monday, first quarter GDP numbers out of Japan are expected to be revised up from initial projections, helped by a pickup in capital spending.
"Growth data for January-March will likely confirm a view that the economy is gradually recovering, but the data will not be something to be happy about," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
"There is a risk that the economy over April-June will not be good, especially for private consumption."
Japan has finally escaped from nearly two decades of deflation -- although is yet to see any meaningful price rises -- and central banks around the world have fretted that after oil prices tumbled their economies might also post negative inflation for a prolonged period.
That has lead to ultra-loose monetary policy for far longer than anyone would have predicted and oil group OPEC stuck by its policy of unconstrained oil output for another six months on Friday, setting aside warnings of a second lurch lower in prices as some members such as Iran look to ramp up exports.
The central banks of Chile, New Zealand, Peru, South Korea and Thailand are all meeting this week but Reuters polls suggest there won't be any action as they wait to see just when the U.S. Federal Reserve finally pull the trigger and raise interest rates.
Bank of England Governor Mark Carney makes his annual Mansion House speech on Wednesday but fears of a protracted period of low British inflation have been superseded by concerns about the effect of sterling's recent rise on growth.
It was his Mansion House speech a year ago when Carney warned interest rates could rise sooner than markets thought.
China, once pegged as a possible saviour of the global economy, will unveil industrial output and retail sales data on Thursday that will probably show Asia's tiger was still only purring in May.
Gloomy business surveys out of China last week had already fuelled anticipation Beijing would have to roll out more aggressive policy measures and any further signs of a slowdown will add to those expectations.
In India, where growth outpaced China for a second quarter between January and March, figures on Friday are likely to suggest industrial production growth waned in April.
The Reserve Bank of India has chopped interest rates three times this year to buoy growth but won't cut again until the fourth quarter as it waits to see how the monsoon season affects food prices, a Reuters poll said last week. [RBI/INT]
Annual monsoon rains arrived at the Kerala coast in southern India on Friday, five days later than expected. On June 2, India scaled down this year's rainfall forecast, raising fears of the first drought in six years.
There is little market-moving data coming from the United States this week, although retail sales are likely to show a strong pick up in May with a surge in auto sales after households cut back on purchases of big-ticket items in April.
The world's biggest economy contracted in the first three months of the year as it collapsed under the weight of unusually heavy snowfalls but numbers on Friday showed job growth accelerated sharply in May and wages picked up.
Those signs of momentum in the economy could put a September interest rate hike from the Fed back on the table.