Germany Narrowly Avoids Recession as Trade Tensions Ease

The German economy unexpectedly rebounded in the third quarter as the trade war between America and China lost some of its intensity, assuaging fears of a recession that could drag down the rest of the eurozone.

Gross domestic product in Germany, Europe’s largest economy, grew 0.1% from the second quarter, when output had fallen 0.2% from the previous quarter, according to official data released Thursday.

While growth in the quarter was hardly torrid, many economists had expected worse. A second consecutive quarter of declining output would have met a common definition of recession.

Strong consumer spending and construction, bolstered by low unemployment and cheap credit, more than offset a decline in industrial production, Germany’s Federal Statistics Office said Thursday.

Germany has been caught in the crossfire of the trade war between the United States and China, both important markets for German cars and other industrial goods. Political chaos in Britain has also added to uncertainty for German businesses.

But exports rose in the third quarter as those tensions receded.

“The probability of a hard Brexit or a further escalation in the trade war caused by the United States has decreased in recent months,” Timo Wollmershäuser, an economist at the Ifo Institute in Munich, said in a statement.

The growth figures take some pressure off Christine Lagarde as she begins her tenure as president of the European Central Bank. She will not need to push for additional stimulus measures, which would be difficult because of divisions on the central bank’s Governing Council.

Germany’s uptick will also mute calls for leaders in Berlin to increase government spending to stimulate growth, which they are reluctant to do.

But the country’s economic prospects remain cloudy. Though Europe’s dominant economy, it was tied with Italy and Austria for weakest performance in the eurozone in the third quarter, according to figures published Thursday by the European Union’s statistics agency.

Overall, the 19 countries that officially use the euro grew 0.2% from the second quarter, the statistics agency said, confirming an earlier estimate.

Carmakers, the backbone of the German economy, are struggling to adapt as the industry moves toward battery-powered cars and autonomous driving technology. Daimler, the maker of Mercedes-Benz cars and trucks, said Thursday that it planned to cut personnel costs by 1.3 billion euros, or $1.4 billion, by 2022.

Daimler did not say how many jobs would be cut, but the figure is certain to be in the thousands.

“The German economy is not structurally sound and healthy,” Carsten Brzeski, chief economist at ING Germany, said in a report Thursday. “It is in the middle of severe disruption and structural changes.”

Germany defied predictions of recession in the third quarter largely because of its extremely low jobless rate of 3.1%. When people have jobs and feel secure, they spend more. Because labor is in short supply, firms are paying more to attract and keep workers.

Low interest rates, the result of central bank stimulus, have encouraged a real estate boom. Construction spending was another bulwark of growth in the third quarter.

But the problems of companies like Daimler suggest that unemployment could begin to creep up. The trade war has not gone away, and British politicians are still trying to figure out how to quit the European Union. President Donald Trump has not lifted his threat to impose tariffs on imported cars, an escalation of the trade war that would hit Germany particularly hard.

“One should not get overly optimistic,” Jörg Krämer, chief economist of Commerzbank in Frankfurt, Germany, said in a note to clients.