German investor confidence unexpectedly showed a mild improvement in July, but economists said weak internal demand still poses questions about the strength and sustainability of an economic recovery.
The Mannheim-based ZEW economic research institute said on Tuesday its expectations indicator for Europe's largest economy rose by one point to 48.4, from 47.4 in June.
The index peaked at 89.6 in January 2000 and plumbed a trough of minus 62.2 in December 1992.
The ZEW survey is heavily influenced by capital markets where nervousness about the weak recovery and the outlook for company earnings have pushed the pan-European FTSE Eurotop 300 index of leading shares down some 4 per cent in less than a month.
Mr Andeas Rees, an economist at HVB Group in Munich, said the medium-term trend of the ZEW expectations index revealed the familiar short-lived German recovery seen over the past decade and pointed to a slowdown in the second half of this year.
"Signs of a softer world economy, especially in the US, have already emerged on the horizon," Mr Rees said.
"And as usual, German internal demand has not shifted from first into second gear so far, preventing a strong and sustainable upswing," he added.