Tesco has sparked fresh fears about the extent of the consumer downturn after revealing that the tougher economic climate finally had begun to affect its huge non-food business.

The supermarket giant also admitted that discount rivals such as Asda and Aldi were “having a moment in the sun” in a trading update that sent its shares down 2.5 per cent to their lowest level for two months.

Sir Terry Leahy, Tesco’s chief executive, said it was clear that shoppers were cautious and that household budgets were being stretched.

Tesco’s like-for-like sales in Britain were up 3.5 per cent excluding fuel in the 13 weeks to May 24.

Sir Terry called the performance “solid” but the growth rate is half the 7 per cent reported by Wm Morrison a week ago and came in below analyst expectations. It is understood that Tesco’s like-for-like growth on nonfood items, such as clothing, CDs and electricals, the driver of much of its expansion in the past decade, was below that on food and drink.

Shares in Tesco fell 10.1p to 391.8p as analysts said it was clear that Britain’s biggest retailer was feeling the pinch from the tougher trading conditions.

J Sainsbury also dropped 2 per cent ahead of its own trading statement next week amid concerns that Tesco may step up its price-cutting campaign. Tesco cut £400 million from prices between February and May.

Asda has been the fastest-growing supermarket out of Britain’s big four grocers since the middle of April as shoppers trade down to cope with rising mortgage and energy bills, as well as spiralling fuel and food price inflation.Aldi, the German-owned discount chain, said that it had enjoyed its best May.

Figures from TNS, the research consultancy, last month indicated that Tesco, which takes £1 in every £8 spent on the high street, lost market share between March and April.

Andrew Higginson, Tesco’s finance director, insisted that overall Tesco was seeing good progress in the UK, but he added: “I think Asda and the discounters are having a moment in the sun with the importance of price – they’re single-club golfers and it’s their time, so I think they’re doing a little bit better.”

Tesco said that sales in its sprawling international business, which runs stores in 12 countries, were up 26.6 per cent over the first quarter, the strongest growth coming in Central Europe. Analysts stuck by full-year forecasts predicting that Tesco would make £3 billion of pretax profit in 2008-09.

However, Geoff Ruddell, retail analyst at Morgan Stanley, believed that Tesco’s rivals were beginning to catch up after struggling to keep pace with the supermarket giant for years.

“Tesco is a victim of its own success. It has done so well for so many years and enjoys much higher sales densities, but now everyone else has got their act together and it appears Tesco is slowly being pulled back into the pack,” Mr Ruddell said.

Counting the cost

3.5%

first-quarter growth in UK like-for-like sales, excluding petrol

£47bn

annual sales worldwide

31.1%

share of UK grocery market

26.6%

rise in international sales at actual exchange rates

-12.1%

Tesco’s sales of frozen desserts in 12 weeks to May 18

391.8p

Tesco closing share price yesterday, down 2.5 per cent

7%

Morrisons first quarter growth in like-for-like sales, excluding petrol

Source: Tesco, TNS

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