Construction slump boosts case for big rate cut

By Christina Fincher and David Milliken

LONDON (Reuters) - The construction sector shrank last month at its fastest pace since records began a decade ago, building pressure on the Bank of England to cut rates by at least another percentage point on Thursday.

Tuesday's PMI purchasing managers' survey for construction follows an equally bleak reading on Monday from its manufacturing equivalent, which helped drive sterling to its biggest one-day fall against the dollar since 1992.

The pound weakened by almost a full cent to $1.4773 after the Chartered Institute of Purchasing and Supply/Markit construction index fell to 31.8 from October's 35.1.

Grim data means economists polled by Reuters have revised their expectations over the past week to predict that the Bank of England will cut rates to 2 percent from 3 percent on Thursday.

Former monetary policy committee member Willem Buiter said the Bank needed to repeat last month's 1.5 percentage point cut, which took rates to their lowest level since the 1950s.

Falling property prices and a shortage of credit took an increasingly heavy toll in the construction survey, when new orders, output, employment, and buying activity all contracted at record rates.

November was the ninth straight month the index has been below 50, the level which marks contraction, and the lowest since the series began in 1997.

Housing construction recorded the sharpest decline, but no sector was spared. Civil engineering, the best performing sector in recent months, also recorded its sharpest contraction since the survey began.