Sept. 1 (Bloomberg) -- Venezuela's annual inflation rate rose to a nine-month high in August as surging government spending fueled by record oil income drove up consumer spending.

Consumer prices rose 2.2 percent in August after increasing 2.4 percent the previous month, the central bank said in a statement. The increase pushed the annual rate up to 14.9 percent, the highest rate since November, from 13.5 percent in July.

Inflation is quickening in the South American country as companies struggle to keep up with the jump in demand sparked by an 80 percent increase in government spending in the first half of the year. Many companies are running their factories near full capacity after years of putting off investment plans, said Alfredo Bozo, general director of Solfin Sociedad de Corretaje de Valores.

``Companies are investing the minimum necessary because the government has failed to create a climate of confidence,'' Bozo said in a telephone interview from Caracas. ``This inflation is especially worrisome given how controlled the economy is.''

Domingo Maza, one of seven central bank directors, said last month that inflation will probably end the year at about 12 percent, two percentage points higher than the government's forecast. The annual inflation rate has risen from a 20-year low of 10.4 percent in May.

`Creeping'

``The main reason why inflation is creeping back up is government spending,'' said Giuliano Celle, a vice president at Citigroup Private Bank, a unit of Citigroup Inc. in New York. ``The spike in oil prices produced higher expenditures on the consumption side.''

Prices for food and non-alcoholic beverages jumped 4.3 percent in August while transportation costs rose 2.8 percent and housing rose 2.4 percent.

The government sets the price of some basic foods, such as meat, pasta and milk and hasn't allowed telephone and electricity utilities to raise prices since January 2003.

The government hasn't raised prices at the state-run Mercal supermarket chain, the country's largest, since it opened in 2003. Gasoline prices, at about 18 U.S. cents a gallon, also haven't changed since President Hugo Chavez took power in 1999.

The government has maintained the bolivar's exchange rate at 2,147.3 per dollar since March 2005, helping hold down increases in the prices of imported goods. Venezuela, which gets about 60 percent of its food, medicine, clothing and electronic goods from abroad, imported a record $14 billion of goods in the first half of the year.

To contact the reporter on this story: Alex Kennedy in Caracas at Akennedy1@bloomberg.net

Last Updated: September 1, 2006 17:14 EDT