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Why It’s Cheaper to Dine Out than to Eat In

All across the country tonight, Americans will be asking one important question: What’s for dinner?For an increasing number, the answer will be on a restaurant menu rather than their kitchen, according to a report released this week by Bank of America Merrill Lynch.

Since mid-2009, consumers have been spending a bigger and bigger portion of their paychecks – now almost 4.5 percent – on dining out. Spending on grocery items, on the other hand, still takes a bigger slice of those paychecks but has remained basically flat over the same period.

Eating out rather than dining in may seem like a perplexing choice for people still trying to recover from the Great Recession, but a closer look at the financial and time pressures families are experiencing helps explain the trend. Shopping and preparing meals takes time – time that people simply don’t have these days. And if Americans do find a spare hour here or there, they’re likely to dedicate it to work so they can earn a little extra, writes Neil Dutta, an economist at Bank of America and co-author of the report.

On top of that, supermarket food prices are increasing at a staggering 6 percent a year, about 2.5 times as fast as the cost of restaurant meals, according to the report. It is becoming cheaper (on a relative basis, the report notes) for consumers to eat out. “It’s all about substitution, as prices at grocery stores rise, consumers will respond by making choices,” says Dutta.

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