By Michael Nienaber
BERLIN (Reuters) - Strong German exports to the United States helped Europe's largest economy to avoid a recession in the third quarter, data showed on Thursday, as companies benefitted from a weaker euro and trade diversion linked to the U.S.-China tariff dispute.
The detailed trade figures underline that U.S. demand for German goods remain strong, undaunted by President Donald Trump's threats to increase import tariffs on European cars.
Germany's export-reliant economy avoided slipping into recession in the third quarter as consumers, state spending and construction drove a 0.1% quarterly expansion. Exports also fared better than in the previous three months.
Overall, exports grew 1.7% year-on-year in the third quarter after a 1.3% decline in the second, with United States and France remaining Germany's two biggest customers, data compiled for Reuters from the Federal Statistics Office showed.
German exports to the U.S. grew 7.6% year-on-year in the third quarter after a 5.3% increase in the previous three months. Exports to France rose 3.1% year-on-year after stagnating in the second quarter.
"Exports to the U.S. are running smoothly," Gabriel Felbermayr, president of the Kiel Institute for the World Economy, told Reuters, adding that the euro had depreciated by 14% against the U.S. dollar since the beginning of 2018. A weaker euro makes German exports less expensive.
"The strong dollar is one of the macroeconomic side effects of Trump's trade policy towards China. It leads to trade diversion," Felbermayr said. That means the United States is increasingly buying goods from the European Union and Germany as tariffs make competing imports from China more expensive.
The United States and China are locked in a trade war triggered by Trump. Both countries have levied punitive duties on hundreds of billions of dollars worth of each other's goods, roiling financial markets and threatening global growth.
But Felbermayr cautioned that the uncertainty created by Trump's trade policy in the medium term will lead to stronger production of German companies in the United States, which will weaken exports.
"The relocation of jobs is already taking place but is not yet visible in the export figures," he said.
The strong sales to the United States and France helped Germany to offset stagnating exports to China. They edged up only 0.3% year-on-year in the third quarter, compared with annual export growth rates of 1.8% in the second quarter and 6.3% in the first.
That suggests Germany can no longer rely on Chinese demand to fuel its export machine and with it, well-paid manufacturing jobs and tax revenues at home.
(Reporting by Michael Nienaber; editing by Joseph Nasr, Larry King)