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Inflation conflagration

The annual pace of inflation cooled to 1.7 per cent last month — but rising prices underneath the turbulence of this headline number suggest the Bank of Canada is unlikely to veer from its interest-rate hiking path.

A new Statistics Canada report Friday showed that the average of three measures of core inflation, designed to filter out the noise of more-volatile items like gasoline, advanced once again in January to hit 1.8 per cent.

The average of the core readings reached its highest mark since September 2016, the latest consumer price index found.

Average core inflation has been on a steady monthly climb since it fell to 1.3 per cent in May 2017. The movement suggests underlying consumer prices have been moving higher due to Canada's recent economic strength.

The upward momentum of underlying prices will catch the attention of the inflation-targeting Bank of Canada. Its ideal inflation bull's-eye is two per cent.

The reading likely reinforces expectations the central bank will continue raising its trend-setting interest rate, which governor Stephen Poloz has already hiked three times since last summer.

The bank's next rate announcement is scheduled for March 7. The Bank of Canada has repeatedly stressed it will remain data dependent when considering future rate decisions.

Overall, Statistics Canada's headline inflation reading of 1.7 per cent for January was weaker compared to a 1.9 per cent result in December and 2.1 per cent in November.

The federal agency said the main downward forces on inflation last month were due to cheaper prices for video and digital equipment, electricity and travel tours.

The report said the primary upward pressure on inflation was driven by higher costs for air transportation, gasoline and restaurants.

Those pricier meals away from home helped propel food prices 2.3 per cent higher than they were a year earlier — for the biggest increase in the reading since April 2016.

Year-over-year gas prices were up 7.8 per cent last month after a 12.2 per cent gain in December.

By region, Statistics Canada found that consumer prices rose at a slower annual pace last month in eight of the 10 provinces. Only British Columbia, with 2.1 per cent inflation, and Ontario, with 1.8 per cent inflation, saw bigger year-over-year price increases.

Follow @AndyBlatchford on Twitter





RBC profits flat

Royal Bank of Canada hiked its dividend as it reported a first-quarter profit of $3 billion, which was relatively flat compared with a year ago but beat expectations.

The Toronto-based lender increased its quarterly payment to common shareholders by three cents to 94 cents per share.

The dividend increase came as the lender saw strong results across its divisions for the quarter ended Jan. 31, but also recorded a writedown due to U.S. corporate tax cuts.

"Strong client activity and volume growth across most businesses drove our first quarter earnings of $3 billion while we absorbed the write-down related to the U.S. Tax Reform," said chief executive Dave McKay in a statement.

The bank's profit for the three-month period ended Jan. 31 amounted to $2.01 per diluted share, compared with $3 billion or $1.97 per diluted share during the same period a year earlier when it had more shares outstanding.

The results in the most recent quarter included a $178-million writedown primarily related to deferred tax assets due to U.S. corporate tax cuts.

After adjustments, Canada's biggest lender by market capitalization earned $2.05 per diluted share, beating the $1.99 expected by analysts surveyed by Thomson Reuters.

The bank's personal and commercial banking arm reported net income of $1.52 billion, down $71 million or four per cent from the same period a year ago. However, the year-ago results included a $212-million gain related to the sale of the U.S. operations of Moneris. Stripping out that one-time increase, RBC's personal and commercial banking division saw net income increase by $141 million or 10 per cent in the latest quarter.

Meanwhile, some of RBC's other divisions have begun to see the benefits of U.S. tax reform, which include a corporate tax rate cut from 35 per cent to 21 per cent.

RBC's wealth management division reported a 39 per cent increase in net income to $597 million from $167 million in the same quarter one year ago. The bank said this increase reflected higher average fee-based assets, an increase in net interest income, and a lower effective tax rate reflecting benefits from U.S. tax reform.

RBC's capital markets division saw a 13 per cent jump year-on-year in net income to $748 million, primarily due to a lower effective tax rate including the benefits from U.S. tax changes and higher results in corporate and investment banking and global markets.

Its insurance arm saw net income decrease five per cent to $127 million, while investor and treasury services saw a two per cent increase in net income to $219 million.

The bank's common equity tier 1 ratio (CET1), a key measure of financial health, was 11 per cent, up 10 basis points from the previous quarter, but flat compared with a year ago.

The bank's provisions for credit losses, or money set aside for bad loans, increased 13 per cent in the latest quarter to $334 million, compared with $294 million a year earlier. However, the quarter was the first to reflect a new accounting standard, which puts a greater emphasis on a banks' expected losses over the life of the loan. That, in turn, introduces more volatility to the measure.

Companies in this story: (TSX:RY)



Airbnb adds inspections

Airbnb is rolling out a new tier of rentals that have been inspected and verified in-person by staff.

A press release from the home-rental organization says its new Airbnb Plus program vets homes offered in the tier with a checklist of over 100 factors, including cleanliness, design and comfort.

The launch follows calls from some Canadians for an end to short-term rentals offered in their buildings and neighbourhoods after some Airbnb users rented homes to throw unruly parties or behaved disrespectfully towards neighbours.

A release says the Airbnb Plus service is aimed at high-end accommodations and has launched with 2,000 homes in 13 cities — a small fraction of the roughly 4.5 million properties listed on Airbnb in 81,000 cities worldwide.

By the end of the year, Airbnb foresees verifying the quality of 75,000 homes in 50 cities.

It will offer people who rent their homes through the tier in-home design consultation and expert photography, but did not say if there was a cost associated with the services or listings.

The Plus program, unveiled Thursday, is aimed at winning over travellers who aren't sure they can trust the computer-driven system that Airbnb uses to assess the quality of rentals. Airbnb believes travellers will be willing to pay more for inspector-certified properties, allowing homeowners and apartment dwellers to recoup a $149 fee to participate in Plus.

The company will also begin offering four new types of properties classified as vacation homes, boutiques, bed and breakfast units and "unique" homes.

A new program called Airbnb for Family and Airbnb for Work will also launch in an effort to help renters find accomodations for social stays, weddings, honeymoons, group getaways and later this year, dinner parties.



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Time to shop around?

Liza Bautista has been sending money home to family in the Philippines for more than 20 years, using the same remittance company for much of the time.

"Because of convenience — and my family over there already knows they're going to be receiving from this institution — I don't shop around any more."

The same is true, she finds, of people she meets as a manager at the Immigrant Services Society of B.C.

"My experience with my clients and my coworkers, if they go to one institution, that's pretty much where they stay."

However, the remittance market has changed significantly in recent years, so those looking to maximize the money they send home should shop around now more than ever.

Remittance companies make their money from a service fee they charge on each payment sent, usually a percentage of the amount transferred and an added cost baked into the exchange rate consumers pay.

Increased competition from both traditional remittance companies and web-based startups has helped lower the cost of sending money abroad. The World Bank estimates costs globally have dropped to an average of 7.09 per cent of money sent from 9.67 per cent in 2009, but still off its five per cent target.

And with hundreds of billions of dollars sent abroad annually — including an estimated $23.7 billion from Canada in 2015 at an average cost of 7.29 per cent — the savings potential is significant.

The World Bank has an online tool that tracks a limited number of remittance prices, showing just how wide a margin there is between offerings.

To send $200 to the Philippines — the third-highest recipient of Canadian remittances after China and India — the tool shows it would cost $22.46 or 11.2 per cent of funds through Royal Bank, while Western Union would cost $15.04 or 7.5 per cent and Filipino-owned iRemit would cost $7.26 or 3.6 per cent.

To send the same amount to India, the rates vary from $4.04 for RemitBee to $34.64 for TD Bank.

The numbers reflect a trend suggesting online brokers often have significantly lower rates than the established operators.

Globally, banks have an average remittance cost of 10.44 per cent, compared with 6.24 per cent with money transfer operators like Western Union or MoneyGram, while mobile online operators have an average cost of 2.82 per cent, said the World Bank.

Many people have kept with traditional operators out of habit, distrust of upstarts, or simply because they don't know of other options, said Aniket Bhushan, lead analyst at the Canadian International Development Platform.

"You may still pay a bit of a premium because people are creatures of habit."

The dropping prices across the board has also made it harder for new entrants to break in, he said.

But new money transfer models continue to emerge, including TransferWise, which converts money using the mid-market rate, not the consumer rate, and touts its fees are around 80 per cent less than those at Canadian banks.



Retail sales down

Statistics Canada says retail sales fell 0.8 per cent in December to $49.6 billion as gains in new car sales were more than offset by lower sales at electronics and appliance stores and general merchandise retailers.

Sales at general merchandise stores fell 5.3 per cent in December, while health and personal care stores dropped 3.8 per cent.

Electronics and appliance stores were down 9.1 per cent in the month following a 12.7 per cent increase in November when sales were boosted by Black Friday sales and new product releases.

Meanwhile, motor vehicle and parts dealers posted a 2.1 per cent increase in December, boosted by a 2.9 per cent increase at new car dealers.

Excluding motor vehicle and parts dealers, retail sales dropped 1.8 per cent.

Economists had expected an overall increase of 0.2 per cent and 0.3 per cent, excluding autos, according to Thomson Reuters.



Smiley sues

Talk-show host Tavis Smiley is suing his former employer, the Public Broadcasting Service, for breach of contract after he was fired over sexual harassment allegations.

The Washington Post reports that the lawsuit was filed Tuesday in D.C. Superior Court against PBS, based in the Washington suburb of Arlington, Virginia.

PBS fired Smiley in December after it said it received multiple, credible allegations of workplace misconduct by Smiley on his eponymous late-night interview show.

Smiley has acknowledged having romantic relationships with colleagues over his career, but says they were consensual.

PBS called Smiley's lawsuit meritless and an effort to distract the public from his misconduct.

Smiley, who is African-American, contends in the lawsuit that racial bias contributed to his dismissal.



CIBC raises dividend

CIBC raised its dividend Thursday as it reported better-than-expected results for its first quarter helped by strong results at home and south of the border.

The bank's increased its quarterly payment to common shareholders by three cents to $1.33 per share.

The higher dividend came as the lender reported a profit attributable to shareholders of nearly $1.31 billion or $2.95 per diluted share for the quarter ended Jan. 31, down from $1.39 billion or $3.50 per diluted share a year ago.

However on an adjusted basis, the bank said it earned $1.41 billion or $3.18 per diluted share for the quarter, up from $1.15 billion or $2.89 a year earlier.

Analysts had expected an adjusted profit of $2.83 per share, according to Thomson Reuters.

"In the quarter, CIBC delivered strong results across all four strategic business units," CIBC chief executive Victor Dodig said in a statement. "We are creating value for shareholders by building a relationship-focused bank, diversifying our earnings growth in the U.S. region, improving operational efficiencies and maintaining disciplined capital deployment."

CIBC was the first of Canada's big lenders to report its first-quarter results.

The bank's results included charges totalling 23 cents per share, including an $88-million net tax adjustment due to a cut to the U.S. corporate tax rate that took effect this year. The lender also recorded a $10-million charge in purchase accounting adjustments in connection with acquisitions of The PrivateBank and Geneva Advisors last year.

The acquisition of PrivateBancorp, The PrivateBank's parent company, last year helped boost CIBC's U.S. commercial banking and wealth management division, which reported net income of $134 million in the latest quarter, up $105 million from the same period in 2017.

The lender's Canadian personal and small banking arm reported net income of $656 million for the period, down $149 million or 19 per cent compared with a year ago. However, on an adjusted basis, net income was $658 million, up $97 million or 17 per cent from a year ago.

CIBC's domestic commercial banking and wealth management division's net income for the quarter was $314 million, up 14 per cent compared with a year earlier. Its capital markets net income was $322 million for the quarter, down $25 million or seven per cent from a year earlier.

The bank's common equity tier 1 ratio, a key measure of the bank's financial health, was 10.8 per cent, up from 10.6 per cent in the previous quarter but down from 11.9 a year ago.



Grocery shoppers 'happy'

A new survey suggests Canadians still have a strong relationship with their grocer — with only about a third of respondents saying their view of their favoured retailer has worsened following revelations of an alleged industry-wide bread price-fixing scandal.

The annual online survey by Argyle Public Relationships and Leger Research found 47 per cent of respondents said their views about their grocer didn't change following allegations that at least seven Canadian grocers and bakery wholesalers co-ordinated the price of bread and related products for more than a decade.

Nine per cent said the revelations significantly worsened their view, while 13 per cent said it improved their opinion of their retailer.

Survey respondents over 45 years of age, as well as those who shop at Sobeys, Freshco or Loblaws were the most concerned.

The annual relationships index found Canadians' relationship with grocers is stronger than with brands in any other category surveyed since 2016, including banks and airlines.

Grocery retailers scored between 68 and 74 out of 100 possible points in a public relations index that averages public ratings of how the brand respondents know best performs on six items, including trust, satisfaction and concern for people.

Three Loblaw Companies Ltd. banners — No Frills, Loblaws and the Real Canadian Superstore — received the lowest scores of the 10 grocery retailers included in the survey, despite offering customers a $25 gift card as a goodwill gesture in light of the company's participation in the alleged price-fixing scheme.

Their competitors' banners, including Sobeys and Metro, outperformed them slightly with scores of 72 and above.



Thrown to 'telco sales dogs'

A consumer watchdog group says Canada's telecom regulator is abdicating its responsibility by refusing to launch a public inquiry into the sales practices of the country's major telecommunications service providers.

The Public Interest Advocacy Centre called for the inquiry early last month to investigate media reports about high-pressure sales tactics used by at least one major company.

PIAC executive director John Lawford said vulnerable consumers, including older Canadians, grieving spouses and blind customers were being targeted by aggressive sales people.

The Canadian Radio-television and Telecommunications Commission responded earlier this month, telling Lawford that consumers already have a number of places to turn if they feel they've been wronged by their telecom service provider, including the Commissioner for Complaints for Telecom-Television Services (CCTS).

CRTC commissioner Ian Scott noted that the complaints body experienced a high satisfaction rate for resolving complaints last year among both consumers and service providers.

The CRTC letter also said Canadians may contact the Competition Bureau with their concerns.

But Lawford said the CRTC neglected to mention that the complaints commission doesn't normally deal with sales practice complaints, and explicitly refuses to deal with misleading advertising.

"The CRTC refusal to inquire into the shocking sales practices of Canada's major telecommunications and broadcasting companies says to consumers 'You're on your own,'" Lawford wrote in response to the CRTC's Feb. 12 letter.

"Sending Canadians to these bodies to try to extract themselves from poor deals after the fact instead of proactively investigating them and restoring the public trust in the market is a major abdication of responsibility by the CRTC," he added in a media statement under the headline "CRTC throws consumers to telco sales dogs."

Scott noted, however, that the CCTS reviewed over 8,600 complaints in 2017, and consumers received compensation in 74 per cent of the complaints, totalling $2.3 million.

He also hinted at possible future action in response to consumer complaints, saying the CRTC also monitors reports from the complaints commissioner to identify emerging issues "which may require further regulatory intervention."



New TPP could hurt NAFTA

American imports into Canada could fall by $3.3 billion under the recently rebooted Trans-Pacific Partnership, the federal government has concluded, sparking fears the new pact could hurt the ongoing NAFTA renegotiation.

The text of the 11-country Pacific Rim trade deal — a pact President Donald Trump pulled the United States out of last year — was released late Tuesday, but a Global Affairs Canada analysis of the deal also delves into the impact on the North American Free Trade Agreement talks, which are to resume in five days in Mexico City.

The Trump administration has blasted trade deficits with Canada as an underlying reason for wanting to renegotiate or tear up NAFTA. The Canadian government rejects that position, saying the statistics don't back the U.S. deficit assertions.

But the most recent analysis of the new TPP — known by the acronym CPTPP — predicts lower U.S. imports into Canada.

"Under the CPTPP, Canadian exports to the United States are not expected to change significantly as the United States is not party to the CPTPP. However, there would be a decline in imports by Canada from the United States, resulting from erosion of U.S.'s NAFTA preferences in the Canadian market," the analysis says.

"Total Canadian imports from the United States are projected to fall by $3.3 billion, led by a decline in automotive products imports."

Flavio Volpe, the president, of Canada's Automotive Parts Manufacturers Association, says that will hurt Canada at the upcoming NAFTA round, where auto remains a major obstacle between Canada and the U.S.

"The report states that U.S. imports into Canada would drop $3.3 billion, mainly in automotive. If true, that is a gap smart U.S. negotiators could then be seeking to close in NAFTA 2.0," said Volpe.

Canadian auto workers and manufacturers have been critical of the new TPP, including the government's assertion that it has gained more access to the protected Japanese market.

International Trade Minister Francois-Philippe Champagne has said a side letter with Japan guarantees greater access and enshrines a dispute resolution mechanism. But that side letter and others with Malaysia and Australia have yet to be made public.

The government's analysis also says, "production in the automotive sector is expected to rise very modestly, by $206 million."

The analysis concludes: "The impacts on the automotive sector are slight, with a small increase in output and exports."

Volpe dismissed those predicted gains as insignificant. He said the gain would amount to only $171 million by 2040.

The government analysis also concluded that the agreement would generate long-term economic gains for Canada totalling $4.2 billion, up from the $3.4 billion that was expected under the old TPP. The increase is due to improved access to member nations in the absence of U.S. competition.



Uber introduces pool rides

The latest variation of an Uber ride will require a short walk.

In eight U.S. cities, the ride-hailing company is rolling out a service called "Express Pool," which links riders in the same area who want to travel to similar destinations. Once linked, riders would need to walk a couple of blocks to be picked up at a common location. They also would be dropped off at a site that would be a short walk from their final destinations.

Depending on time of day and metro area, Express Pool could cost up to 75 per cent less than a regular Uber ride and up to half the cost of Uber's current shared-ride service called Pool, said Ethan Stock, the company's product director for shared rides. Pool, which will remain in use, doesn't require any walking. Instead it takes an often circuitous route to pick up riders at their location and drops them at their destination. But that can take longer than Express, which travels a more direct route.

Uber has been testing the service since November in San Francisco and Boston and has found enough ridership to support running it 24 hours per day. Within the next two days, the around-the-clock service will start running in Los Angeles; Philadelphia; Washington, D.C.; Miami; San Diego and Denver. More cities will follow, Uber said.

The new service could spell competition for mass transit, but just how much depends on how well it works and how good the mass transit is, said Mark Hallenbeck, director of the Washington State Transportation Center at the University of Washington. If buses or subways are overcrowded and Uber can provide service for a similar price, that will help with mobility.

"If, however, you are cannibalizing transit that's not over-subscribed, then that becomes a bad thing," Hallenbeck said.

Also, if the ride-sharing service pulls people off mass transit and creates more automobile traffic, that will add to congestion, he said.

The service could complement Uber X, the company's door-to-door taxi service — or draw passengers away from it.

Stock said the system should work well with public transit, providing first-mile and last-mile service for transit riders and by providing service to low passenger volume areas where it's not cost effective for public transit to serve. He also says it will reduce congestion by cutting the number of personal vehicle trips.



Maple Leaf ups dividend

Maple Leaf Foods Inc. raised its quarterly dividend as it reported a fourth-quarter profit of $59.1 million.

The company says it will now pay a quarterly dividend of 13 cents per share, up from 11 cents.

Maple Leaf says its profit in its latest quarter amounted to 47 cents per share compared with a profit of $76.2 million or 57 cents per share in the same quarter a year earlier.

Sales in the quarter ended Dec. 31 totalled $876.8 million, up from $828.2 million in the last three months of 2016.

On an adjusted basis, the company says it earned 41 cents per share, up from an adjusted profit of 31 cents per share a year ago.

Analysts had expected a profit of 39 cents per share, according to Thomson Reuters.



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