Potato Gnocchi with Pesto

1 1/4 cups plus 2 tablespoons all-purpose flour

2 large egg yolks

1/2 teaspoon fine salt

Generous pinch freshly ground nutmeg

1/2 cup heavy cream

1/2 BASIL PESTO recipe (about 1/3 cup), recipe followsBASIL PESTO

2 cups loosely packed basil leaves, washed and dried thoroughly

2 tablespoons toasted pine nuts

2 tablespoons freshly grated Parmesan

1/4 teaspoon minced garlic

1/2 teaspoon kosher salt

1/4 cup plus 1 tablespoon extra-virgin olive oil

Freshly ground black pepper