Under Cairo’s baking summer sun, a forecourt of heavily discounted new Toyotas showcases a surprising side-effect of March’s dramatic currency devaluation: prices for big-ticket items are tumbling.

They’ve fallen so much, in fact, that would-be buyers of everything from sofas to refrigerators and automobiles are holding off, convinced they can wait for a better deal. Almost no one is splashing out - and that’s an issue Egypt’s consumer-led economy needs to overcome.

“People just come and ask about prices,” said Mohamed Yassin, a vendor at a large furniture store in the capital’s eastern Heliopolis neighborhood. “They’re afraid to buy in case prices go down more.”

Authorities in March let the pound plunge by nearly 40% in a bid to stem a two-year crisis that was pushing the economy of the Middle East’s most populous nation to the brink before a US$57 billion global bailout helped turn things around. But Egypt’s subsequent price drops are flying in the face of most economic wisdom, not to mention the experience of places like Nigeria and Argentina where costs surged after devaluations.

At play are the lingering effects of a now-defunct black market in foreign currency that saw Egyptian importers stock up on US dollars at extortionate rates and pass it along to consumers by sharply raising local prices at the tills. Yet with greenbacks now freely available and the pound trading stronger than its parallel market nadir, many retailers are left desperately trying to offload inventory with price tags that seem unjustifiably high.

It’s all part of a tumultuous time for Egyptian household budgets. While a Mercedes may be cheaper than in 2023, other living costs are continuing to climb - albeit at a more moderate pace than before - and hikes for electricity and fuel are widely expected.

A recovery in demand would be a welcome sign the African continent’s third-largest economy is recalibrating and orthodox policies are again taking root after a period of authorities taking stopgap solutions like import curbs that left businesses guessing. That may help spur much-needed direct foreign investment and further boost the confidence of bond-buyers who’ve been piling into Egyptian debt since the devaluation.

“It’s a waiting game between consumers and traders,” said Mohamed Abu Basha, head of research at Cairo-based investment bank EFG Hermes. “The market on both sides is taking time to absorb the exchange-rate volatility witnessed during the last few months.”

In recent years, Egypt was so starved of foreign exchange that some consumer goods grew scarce as billions of dollars of imports remained stuck at the country’s ports. And the nation also suffered an occasional deficit of other products, like tobacco, as distributors and retailers stockpiled supplies in anticipation that the local currency was going to weaken sharply.

Traders working in businesses ranging from real estate to mobile-phone retailing told Bloomberg their sales volumes have declined since the devaluation. Car sales in May reached just 4.810 units, according to the latest available data, a decline of almost 75% compared with the monthly average in 2021 before the economic crisis.

Meanwhile, the prices of models including the Hyundai Tucson, Volkswagen Tiguan and Kia Sportage have dropped by about one million Egyptian pounds , leaving them costing roughly a quarter less than before the currency slump.

Automobiles are seeing particularly sharp falls because the sector was especially prone to acute supply shortages that inflated prices before the devaluation, Abu Basha said. Traders of other products “are mostly choosing to offer temporary discounts - rather than direct price cuts - as they await more clarity on the pound and consumer behaviour,” he said.

Samer, a 46-year-old engineer who’s been eyeing a family saloon since February, is a case in point. He has repeatedly delayed as “insane” prices keep cooling. “Thank God I didn’t buy earlier,” he said.

Hefty discounts still aren’t enough for people like Rasha Mahmoud, who’s been on the lookout for home appliances to outfit her daughter’s marital home before her upcoming wedding. “Many people advised me to wait a bit, as things may get cheaper,” she said.

Across urban parts of Egypt, inflation has eased for four straight months, leaving it down more than 10 percentage points from an annual record of 38% last September. At the same time, the slowdown has been uneven. Costs for clothing and transport have climbed, but food prices veered from declines to increases last month. 

A gradual phasing-out of fuel subsidies and a possible rise in power tariffs this summer could add to pressures, although a 300% hike in the price of subsidised bread that took effect on June 1 appears to have had little effect on the headline figure.

Egyptians are wondering what comes next. In a crowded Cairo metro car on a recent weekday, people questioned if more expensive bread means the worst is still to come for other staples or whether some prices that are on the decline may have further to go.

Samia, who was holding her two-year-old child, said she used to pay three Egyptian pounds for 60 loaves of state-supported bread - enough to feed her family of five for two weeks - but the cost has now quadrupled. 

“We were happy that finally the prices of sugar and flour went down, until the government announced the bread hike,” she said.

Whipsawed by similar uncertainty, businesses like Yassin’s furniture store find themselves left in the lurch. Sitting in his empty shop, he complains that the consumer downturn has cut sales by more than 50% in the past few months, making it harder to cover wages and electricity bills. 

The store has already reversed a 30% price hike it imposed before the devaluation and is offering discounts of as much as 50% in an effort to attract some customers during what he calls “a recession.”

“All this failed to change the situation,” he said. “Everyone is in wait-and-see mode.”