Turmoil in Europe and belt-tightening in China are endangering a U.S. economic recovery that many believed was tentative even without headwinds from abroad.
Reports on the U.S. economy this week should offer the same confusing mix of strength and fragility that has kept investors guessing, further muddling the prospects for monetary policy as a string of Federal Reserve officials hits the speaking circuit.
Without a meaningful acceleration in consumption growth, it won't be long before the overall economic recovery fades, said Paul Dales, economist at Capital Economics.
Housing starts are expected to have recouped some ground as the year began after fresh signs of distress late last year. Industrial production, a key driver of America's return to economic expansion, is forecast to have climbed another 0.8 percent in January alone.
At the same time, inflation data should show that while price growth is relatively subdued, policymakers can no longer dismiss it out of hand, particularly with market-based expectations for price rises picking up. The increases are coming in part from overseas, with import costs seen surging about 0.8 percent.
Still, cost pressures may be the least of worries for financial markets, at least in the short-term. More immediate is the sense of uncertainty that has enveloped Europe's fiscal outlook ever since Greece's elevated public debt levels first surfaced as a source of concern.
In a circular manner, the troubles there could indirectly hurt U.S. growth prospects by boosting the U.S. dollar and denting the rise in exports that has helped underpin the country's return to growth from the worst recession in over 70 years.
We'd all rather see the strength of the dollar come from expectation of a strong U.S. economy, said Tim Quinlan, economic analyst at Wells Fargo. Instead, our only progress is at the expense of a deteriorating European currency.
Germany's ZEW survey of business sentiment for February, out on Tuesday, is expected to show considerable deterioration, with the index predicted to slip down to 42.0 from 47.2
Euro zone finance ministers will meet on Monday to put some meat on a bare-bones promise of support for Greece, though the likely absence of concrete dollar figures could unnerve investor sentiment.
So might any further signs from China that it is serious about slamming the breaks on its red-hot expansion to prevent inflation, including a potential housing bubble of its own. Chinese markets will be shuttered this week for the lunar New Year, but any pronouncements from top officials will be watched closely.
Chinese growth has come back so strongly from last year's slump that it has managed to drag a challenged Japanese economy out of the mud. Japan will release its gross domestic product data on Monday, and it is expected to show a 3.7 percent increase in the fourth quarter following a brutal downturn.
Asian demand, especially China, has been vital to what recovery there has been in Japan, said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
On Friday, China surprised markets by raising the level of required bank reserves for the second time this year as a way to tighten lending, shaking equity markets around the world.
For now, this and other overseas developments have yet to significantly impact U.S. manufacturing activity. Two Fed surveys of regional manufacturing would likely show further improvement so far in February.
A number of regional Fed presidents will take the podium too and could offer a further look into policymakers' outlook for the economy. Ben Bernanke's testimony last week outlining the central bank's road map for withdrawing stimulus came with the caveat that any move to tighten policy is not imminent.
Minutes from the Federal Open Market Committee's latest meeting, to be released on Wednesday, could shed some light on whether Kansas City Fed President Thomas Hoenig's dissent against the central bank's vow to keep rates low for an extended period met any sympathy among his peers.