The sleep is occurring, but the output buffer isn't getting flushed until the script terminates. The reason is that the output buffer only gets flushed under one of three conditions: (1) The program terminates OR (2) You output a '\n' character OR (3) the buffer fills.

You can modify this behavior by setting $| to 1 (turning on autoflush), or you can just end your printed lines with a newline character to force a buffer flush.