LONDON (Reuters – Euro zone manufacturing growth slowed last month due to Russia’s invasion in Ukraine. The tightening of supply chains and dampening demand caused a drop in confidence.

The combination of increased cost-of living crises and uncertainty from the invasion suggests that the bloc’s manufacturing sector could be in recession.

S&P Global (NYSE:)’s final manufacturing Purchasing Managers’ Index (PMI) fell to a 14-month low of 56.5 in March from February’s 58.2, below an initial “flash” estimate of 57.0 but still well above the 50 mark that separates growth from contraction.

The output index, which feeds into the composite PMI, fell to 53.1, from 55.5. This was the lowest level since June 2020 when the bloc was suffering the coronavirus pandemic.

“Just as the fading of the latest pandemic wave was creating a tailwind for the euro zone manufacturing recovery, with economies reopening and supply chain bottlenecks easing, the war in Ukraine has created an ominous new headwind,” said Chris Williamson, chief business economist at S&P Global.

“Sanctions, rising energy costs and supply restrictions linked to war have caused a significant drop in rates of growth.”

Overall demand growth weakened as factories, facing soaring input costs, increased prices at the fastest rate since S&P Global began collecting the data in 2002. For the first-time since June 2020, export orders, which include trade between members, fell.

According to a Reuters poll data will be available later Friday. The results are expected to indicate that inflation in the bloc rose to 6.6% last month. This could increase pressure on European Central Bank policymakers who want to increase interest rates.

The confidence indicators have dropped in the region and the PMI for future output has fallen to 54.4, from 68.5. This is its lowest reading since May 2020.

Williamson explained that business optimism has dropped to levels indicative of falling manufacturing output in the quarter. This increases the likelihood of the manufacturing sector entering a recession.