Eurozone business confidence in August in both manufacturing and services sectors suggests moderate expansion in activity. The flash Eurozone Manufacturing PMI Output Index edged up by +0.1 points to 54.5, a 3-month high. The Services PMI Activity Index increased by +0.2 to 54.4, a 2-month high. July and August readings suggest GDP will expand by around +0.4% to +0.5% q/q in Q3 after +0.4% in Q2. External demand was reported to have remained weak as new export orders in the manufacturing sector increased at their lowest monthly pace in two years. Both surveys reported cautious business optimism as companies fear cooling demand, higher prices and rising political concerns. While we do not expect a steady increase in commodity prices, input costs will be impacted by the rise in wages (+2.3% y/y at end-2018) given the robust jobs growth. Thus, we expect consumer spending to accelerate after the end of the summer once inflation will cool down. Overall, GDP growth is expected to reach +2.1% in 2018.