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The heart of Canada’s financial district at the corner of King and Bay streets in Toronto.KEVIN VAN PAASSEN/The Globe and Mail

Canadian executives are expressing much more optimism about the health of the global economy then they were six months ago, but that confidence isn't translating into an appetite for deals.

More than half of these business leaders believe the global economy is improving, according to Ernst & Young's Canadian Capital Confidence Barometer report to be released Wednesday. That's up from about one-fifth of surveyed respondents six months ago.

That attitude is likely why 66 per cent of Canadians polled expect global merger and acquisition volumes will increase in the next year, however the research found that only 33 per cent were actually planning to do any deals. That's a significant drop from this time last year, but more closely aligned with intentions to pursue acquisitions in the United States.

"Normally this positive sentiment would translate into significant capital investment and M&A activity," Ernst & Young's Tony Ianni wrote in the report. He calls the situation a confidence paradox. "Uncertainty in the U.S. with regard to fiscal policy and sequestration, slowing growth in emerging markets and continuing concerns of Eurozone stagnation are persuading Canadian businesses to wait a little longer before acting."

The study asked more than 1,500 senior executives from large companies around the world to look 12 months into the future. About half of the Canadian executives who said they planned to complete deals plan to use cash as their main source of financing. One year ago, that figure was closer to 40 per cent. The U.S. is seeing a similar uptick in intentions to use cash to fund growth.

That preference for cash is interesting considering another major theme to emerge from the study was confidence about available credit – 45 per cent of Canadian respondents see improvement, and that's the highest figure in two years. Still, fewer respondents expected to refinance their debt in this study.

Businesses are also planning to hire more employees, and have fewer layoff plans than they did six months ago. Although, when it comes to the intention to create jobs, the country still lags behind the U.S.

(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)

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