REFILE-Canada business confidence up in 3rd qtr -survey

(Refiles to fix headline to "business confidence" from "business conference"

* Business confidence highest level since 2007

* Capacity utilization still a concern

TORONTO, Nov 4 (Reuters) - Business confidence in Canada strengthened in the third quarter, a new survey showed on Wednesday, as the economy showed tentative signs of emerging from deep recession.

The Conference Board of Canada's index of business confidence rose to 97.8 in the quarter, the highest level since 2007. That's up from a 81.9 reading in the second quarter.

Business leaders were generally optimistic about prospects for economic recovery. Asked about economic conditions six months from now, 63.1 percent said they expected improvement, while 6.9 percent said they expected further deterioration.

Of those surveyed, 60.8 percent expected their companies' finances to improve over the next six months, and more than half saw stronger profits, while 12.3 percent expected profits to worsen. More than half of respondents also said that now is a good time to invest in plant or equipment.

Despite the generally optimistic tone, only 28.1 percent of respondents said their companies were operating at, close to, or above capacity. At the same time, 28.9 percent of respondents said their firms were operating substantially below capacity.

"The greater optimism among respondents is a positive sign, but this spare capacity must be eroded before firms can return to business as usual," the Ottawa-based research organization said.