* More signs of manufacturing rebound in Asia
* Growth contrasts with surprise drop in US Midwest activity
* S.Korean exports fall less than expected as demand recovers
* Japan firms less gloomy but still plan big spending cuts
By Yoo Choonsik and Hideyuki Sano
SEOUL/TOKYO, Oct 1 (Reuters) - Manufacturing activity in South Korea and Australia extended rebounds in September, echoing a strong pick-up in growth across Asia that contrasted sharply with a surprising and worrisome slowdown in the U.S. Midwest.
South Korean factory activity expanded for a seventh month in September, though the pace slowed, while Australian manufacturing hit a 21-month high, private surveys showed.
Activity at U.S. factories in the nation's heartland, however, slowed unexpectedly last month and private employers cut more jobs than expected, suggesting the road back to global economic health will be rocky even if Asia builds up momentum.
The Institute for Supply Management-Chicago said on Wednesday its business barometer fell to 46.1 in September from 50.0 in August. A reading below 50 indicates contraction, while levels above 50 reflect expansion.
"What it comes down to is how much of this recovery is going to be sustainable. I'm not a believer yet that this is a robust economy. This is going to be a very frustratingly weak growth period," said Robert MacIntosh, chief economist at Eaton Vance Corp in Boston.
A nationwide U.S. manufacturing activity survey due later in the day is expected to show growth accelerated last month, while reports from the Eurozone could show business is close to expanding again. Factories in Britain, meanwhile, likely saw a slight rebound after an unexpected dip in August.
ASIA IMPROVES AS THE WEST STRUGGLES
Reports from across Asia show much of the continent is gathering strength, though Japan's economy continues to sputter.
China's manufacturing activity expanded for a seventh month in September, with new orders from at home and abroad picking up, official data showed on Thursday, largely in line with a private survey on Wednesday.
The official purchasing managers' index (PMI) rose to 54.3 from 54.0 in August, the strongest reading in 17 months, the China Federation of Logistics and Purchasing (CFLP) said. The new export orders sub-index hit 53.3 versus 52.1 the previous month.
The report adds new evidence that growing domestic consumption in China is helping to offset weak export demand, though some economists worry the economy is still too reliant on government stimulus to generate activity, concerns which are shared by many policymakers around the world.
In South Korea, the HSBC/Markit manufacturing Purchasing Managers' Index (PMI) also showed activity expanding for a seventh month, though the rate of growth eased slightly to 52.7 from 53.6 in August
Separately, the government reported South Korean exports in September fell 6.6 from a year earlier, much less than expected.
The Australian Industry Group/PriceWaterhouseCoopers Performance of Manufacturing Index (PMI) rose 0.3 points to 52.0, adding to August's 7.2 point jump and holding above the 50 level that separates growth from contraction.
The survey of 200 companies found a marked turnaround in employment after 20 months of decline. The index of employment climbed 9.2 points to 49.7, indicating hiring and firing was essentially in balance. A return to job creation is vital for a durable economic recovery.
In Japan, the world's second-largest economy, business morale improved further from a record low earlier this year but remained negative overall for the fifth quarter, the central bank's tankan corporate sentiment survey showed.
However, large companies continued to cut their capital spending plans -- one of the weakest links in the economy now -- suggesting the economy will struggle in the months ahead. (Additional reporting by Wayne Cole in SYDNEY and Jason Subler in BEIJING; Writing by Kim Coghill; Editing by Jan Dahinten)