Waning confidence and rising rates likely to curb spending - 1% hike would add $18 billion in interest costsTORONTO, Aug. 5, 2014 /CNW/ - Canadian consumers have continued to carry the economy in 2014, but rather than borrow to fuel spending, Canadians have increasingly been cracking open their piggy banks and dipping into their savings, finds a new report from CIBC World Markets. "Though Q1 wasn't a barn burner, nominal household spending was still up by 4.2 per cent, year-on-year," says Avery Shenfeld, Chief Economist at CIBC. "Furthermore, its contribution to GDP growth continues to remain in line with its long-term average and Q2 looks poised to see an acceleration. It wasn't borrowing, but until recently, elevated confidence and its impact on savings, that provided the fuel." The report, co-authored by Benjamin Tal and Nick Exarhos, notes that weak disposable income gains have been offset by strong increases in net worth driven by healthy equity markets and climbing home prices. As a result, Canadians stabilized their savings rates at around 5 per cent in the first quarter of the year, a drop from levels seen in early 2013. "With the asset side of consumer balance sheets allowing Canadians to reduce how much they squirrel away, more money has been temporarily available for spending," says Mr. Shenfeld. "Falling rates on pre-existing debt—which lowered both the incentive to save and debt-servicing costs—provided consumers with additional sources of relief. In fact, interest payments as a share of disposable income fell over the past year by a full percentage point to a record low of 7.1 per cent in the first quarter. Had payments and the savings rate stayed constant since Q1 2013, household consumption would have been around a percentage-point lower."