Economic slowdown to crimp restaurant sales

NEW YORK (CNNMoney.com) -- A weakening economy is unlikely to stem the tide of Americans eating out, although the restaurant industry expects sales growth to slow slightly next year.

The nation's restaurants are expected to bring in $558 billion in sales next year, up 4.4 percent over this year, according to the National Restaurant Association, a trade group.

The pace of sales growth, however, is forecast to slow from the 4.6 percent rate anticipated in 2007.

The outlook comes amid a surge in food costs and growing fears that the economy will fall into a recession. The restaurant sector makes up 4 percent of gross domestic product - the broadest measure of the nation's economic activity.

"While the overall economy is slowing, the industry will still show respectable growth," Dawn Sweeney, CEO of the association, said in a statement.

The number of jobs in the sector is projected to increase about 2.3 percent next year to 13.1 million, up from 12.8 million in 2007.

Strength in local economies, an increase in disposable income and population growth are expected to drive sales.

The association expects the "snack-and-nonalcoholic beverage bars" segment to see the strongest growth next year, with a projected $20.9 billion in sales. This segment includes coffee chains like Starbucks (Charts, Fortune 500) and juice bars like Jamba Juice (Charts).

Full-service restaurants are expected to rely more heavily on "off-premises" options like takeout, delivery and curbside service to meet Americans' desire for convenience. Quick-service restaurants, on the other hand, will likely expand their menus to satisfy the growing interest in healthy eating.

Hudson Riehle, senior vice president of research for the association, said that next year will be a "moderate growth environment" despite being a "positive sales environment."

However, "over time, the consumer continues to spend a growing portion of their food dollar away from home," Riehle said, adding that consumers spent 25 percent of their food budget away from home, compared to 48 percent today.

The association expects disposable personal income in the U.S. to rise a moderate 3.4 percent in 2008, when adjusted for inflation. That's down slightly from the 3.6 percent gain expected in 2007.

Meanwhile, wholesale food costs are expected to increase 1.1 percent next year, which is significantly lower than the 7.2 percent spike recorded in 2007.

The cost of food and beverages accounts for roughly 33 cents for every dollar of restaurant sales, the association said.

Riehle says that the restaurant industry has worked to avoid menu price increases due to higher wholesale prices, but that price increases in the 3 percent range could be a reality next year.