German investor confidence picked up in June for the first time this year but the strength of the upturn in the euro zone's biggest economy remained in doubt, a leading German economic institute said yesterday.

The ZEW institute said its economic expectations index rose to 47.4 in June from 46.4 in May, helped by buoyant export demand, strong industrial output data and the recent drop in oil prices.

But Wolfgang Franz, ZEW president, said the improvement was "disappointing" and had dented hopes for a "marked pick up" in the German economy. He said the high oil price was continuing to depress sentiment by stoking inflationary pressures and expectations of interest rate increases in the months ahead.

Economists said the survey showed expectations of growth were modest even though German exporters were reaping the benefits of the global upturn.

The weakness of the domestic economy and the further deterioration in the labour market have revived doubts about the sustainability of Germany's economic recovery. - (Financial Times Service)