WASHINGTON, (Reuters) – A gauge of U.S. economic activity rose to an eight month high in March. This was fueled by strong US demand for goods and services. However, sentiment has been hurt by Russia’s aggression against Ukraine.

S&P Global (NYSE:) said on Thursday its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, rose to a reading of 58.5 this month. It was the second highest reading since February 2005, and 55.9 in February.

An increase in private sector growth is indicated by a reading of 50 or more. The recovery from January’s slump was largely due to pent up demand, the lifting of COVID-19 regulations across the country and a large decline in coronavirus infections. There were also less severe disruptions in the supply chain.

Flash composite orders index has risen to nine-months high. Businesses report that they are more competitive now and have won new customers because of the availability of inputs.

Employers hired at the fastest rate since April 2021 as they had new work to do and more orders.

Companies reported more increases in the prices of fuel, raw materials and energy, indicating that inflation continued to rise. The Russian invasion of Ukraine and the lockdowns in China due to the COVID-19 virus will continue to raise prices. This could slow down global supply chain improvements.

The February increase in consumer prices was the largest in 40 years.

Businesses were generally positive about the outlook for this year. However, their confidence fell amid concerns over the Russia-Ukraine War and rising input costs. According to S&P Global, businesses in the services sector were less upbeat, concerned about the impact of reduced disposable incomes as the cost of living rises.

From 57.3 in Feb, the flash manufacturing PMI reading in this survey rose to 58.5. Reuters economists had predicted that the index of this sector which represents 11.9% of the economy would drop to 56.3.

From 56.5 in Feb, its flash services sector PMI grew to a reading at 58.9 in this month. According to economists, the reading for February’s flash services sector PMI was 56.0. This is more than half of U.S. economy activity.