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U.S. restaurants to benefit as grocery prices rise-NPD

* Grocery prices rising faster than restaurant prices

* Restaurant menu price hikes likely to lag in 2011

* Consumers adding more meals at restaurants

LOS ANGELES, Jan 18 (Reuters) - Rising grocery prices are driving more U.S. diners back to restaurants, which saw traffic fall when the recession sent supermarket food prices down sharply, NPD Group Inc, a market research firm, said on Tuesday.

“Right now, supermarket prices are rising faster than restaurant prices,” said Harry Balzer, chief industry analyst at NPD and author of “Eating Patterns in America.”

“The advantage is to the restaurant,” said Balzer, who expects restaurant menu price increases to lag price hikes in the grocery aisle for all of this year.

While Americans prepare 72 percent of their meals at home, they spend almost half of their food dollars in restaurants, Balzer said.

Supermarket food prices peaked in 2008, dropped in 2009 and started to rise again in the last months of 2010.

Balzer said food prices at grocery stores currently are up less than 2 percent from a year ago, when they were down by 2 percent.

Grocery stores are faster to pass changes in food costs on to consumers than operators of large restaurant chains, which tend to lock-in long-term prices for key food items.

Over the last few years, a weak economy, high unemployment and low prices for supermarket staples like meat, produce and milk prompted people to save money by cooking at home.

Those trends contributed to a drop in restaurant traffic.

Annual U.S. restaurant visits, which totaled 61.5 billion for the year ended November 2008, fell about 4 percent to 59.1 billion for the year ended November 2010.

A healing U.S. economy has prompted some diners to add restaurant visits back to their routines, but unemployment continues to hamper the industry’s growth, NPD said.

“The screw has turned a bit,” Balzer said. (Reporting by Lisa Baertlein; Editing by Phil Berlowitz)

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