* U.S. manufacturing marks worst quarter in three years
* European service firms struggle
* Surveys back view of imminent rate cut from ECB
* Chinese factories in decline for 11th month
By Steven C. Johnson and Andy Bruce
NEW YORK, Sept 20 (Reuters) - U.S. manufacturing suffered its weakest quarter in three years and conditions at European businesses worsened, surveys showed on Thursday, while China's economy continued to lose momentum.
The data shed more light on the difficult task facing global policymakers, particularly in Europe and the United States, who have tried to increase growth with aggressive monetary stimulus.
The U.S. manufacturing sector closed out its worst three months in September since the third quarter of 2009, according to financial information firm Markit. Export orders fell for a fourth month running as demand from Europe and Asia faded, with September's slide the steepest in nearly a year.
Markit's flash U.S. manufacturing purchasing managers index remained stuck at 51.5 this month, unchanged from August.
"Manufacturing isn't looking good," said David Sloan, economist at 4Cast Ltd in New York, adding that "the global situation is a restraint on the U.S. economy.
"Certainly, there is not going to be much growth in Europe. Growth in Asia, and China in particular, is slowing down, so U.S. growth is going to have to be domestically generated."
The weak data fed global growth worries, driving investors to sell euros and flock to safer currencies like the dollar and the yen. The euro tumbled to a one-week low against the dollar and slid more than 1 percent against the yen. Stocks around the world fell in sync with the euro.
Another report showed factory activity in the Mid-Atlantic region fell for a fifth straight month, though the rate of contraction slowed.
In an example of how slowing growth is hurting corporations, Norfolk Southern Corp., the third-largest U.S. rail operator, cut its profit forecast, citing reduced coal and merchandise shipments, late on Wednesday.
The reduced outlook from Norfolk Southern followed a warning from FedEx Corp., the world's second-largest package delivery company, which lowered its fiscal 2013 forecast on Tuesday. FedEx said its earnings could fall as much as 6 percent for the year as a weakening economy gives its customers a reason to use lower-priced and slower shipping options.
EARLY FALLOUT FROM THE FISCAL CLIFF
Complicating things further for U.S. companies were worries about the nearly $600 billion worth of spending cuts and tax hikes set to take effect in 2013, known as the "fiscal cliff."
Children's publisher Scholastic Corp. said second-quarter revenue fell 17 percent as schools delayed spending in preparation for fiscal contraction in 2013.
The U.S. economy expanded at a sluggish 1.7 percent rate in the second quarter, but economists worry that the looming fiscal cliff as well as the slowdown in manufacturing may have slowed growth even more between July and September.
The Federal Reserve said last week it will hold interest rates at zero until mid-2015 and would buy mortgage-backed bonds monthly until the job market improves substantially.
MORE STIMULUS LIKELY IN EUROPE, CHINA
There was little indication that the European Central Bank's plan to buy the government bonds of troubled euro-zone states has boosted confidence among the euro zone's businesses.
Markit's composite euro-zone purchasing managers index fell to 45.9 in September from 46.3, and Markit said it suggested the euro-zone economy could shrink by roughly 0.6 percent in the third quarter ending this month.
"The fall in the PMI is another reminder that the ECB's new asset-purchase program is not an answer to all of the region's problems," said Ben May, European economist at Capital Economics, in a research note. "The euro-zone recession looks set to deepen in the latter part of the year."
Export-driven Asian economies struggled again in September.
The China HSBC manufacturing PMI inched up in September to 47.8 from August's nine-month low of 47.6, suggesting the world's second-largest economy remains on track for a seventh quarter of slowing annual growth.
"In order to convert hopes into reality and avoid an outright hard landing, the Chinese authorities have to step up again their accommodative efforts on both the fiscal and the monetary side," said Nikolaus Keis, an economist at UniCredit.
China's economic slowdown is expected to reach its nadir this quarter, with a recovery of momentum delayed until the final quarter, leaving growth for 2012 likely to fall below 8 percent - a level last seen in 1999, a Reuters poll showed last week.
European and Chinese leaders were meeting in Brussels to discuss trade and Europe's debt crisis..
European manufacturers performed slightly better than economists had hoped this month, while the downturn in Germany, the euro zone's largest economy, also eased a bit.
"Whether or not that will last is the big question. We're not altogether hopeful about that," Markit chief economist Chris Williamson said.
However, trouble for French factories and service-oriented businesses increased at a faster pace than expected.
Altogether, the surveys bolstered expectations that the ECB will cut its main interest rate in October to a new record low.
"Further macroeconomic stimulus - including a weaker euro and an ECB rate cut - is likely to be needed to put the region on a path of sustained growth and hence ensure the survival of (the euro zone)," said Martin van Vliet, an economist at ING.