China's inflation stayed subdued in January while factory-gate prices extended the longest drop since the 1990s, in a sign of moderating demand in the world's second-largest economy.

The consumer price index rose 2.5 percent from a year earlier, the National Bureau of Statistics said today in Beijing, the same pace as in December. The producer-price index fell 1.6 percent. China's economic data are distorted in January and February by the shifting timing of the week-long Lunar New Year holiday, which began on Jan. 31 this year.

Today's reports may give the Chinese leadership more room to support economic growth. The central government is trying to balance reining in a credit boom and extravagant spending by officials with maintaining expansion above Premier Li Keqiang's 7 percent "bottom line" to sustain employment.

Credit Suisse Group AG earlier this week cut its estimate for January consumer-price inflation to 2.2 percent from 3 percent, citing weak retail sales during the holiday and lower meat consumption due to a renewed outbreak of bird flu. The firm also lowered its full-year forecast to 3 percent from 4 percent.

"The central bank seems to be tuning down its concerns over rising inflation," Credit Suisse economists led by Dong Tao in Hong Kong wrote, citing a report this month from the People's Bank of China.