A recent McKinsey analysis highlights a growing divergence in consumer behavior across generations. Boomers are tightening their budgets, while Millennials, despite economic headwinds, continue to spend. At first glance, it might look like a generational finance story, but for those of us working in local economic development, it points to something much bigger: a fundamental shift in the demand landscape that underpins how communities grow, develop, and attract investment.

We often talk about demand for retail, housing, restaurants, or small businesses as if it’s a static, demographic-based phenomenon. But the truth is, economic development doesn’t happen in a vacuum; it’s shaped by who is spending, what they value, and how they choose to engage with place.

The McKinsey chart shows Millennials driving much of the current consumption growth. They are fueling demand for experiences, convenience, and quality-of-life amenities; things like independent coffee shops, boutique fitness studios, food halls, mixed-use neighborhoods, and walkable districts with a distinct identity. They’re often spending more on things that connect them to community, identity, or lifestyle.

Boomers, meanwhile, are pulling back. They’re spending less across multiple categories, reflecting a shift toward value-conscious behavior and savings-oriented priorities. For communities that have historically catered to or relied on Boomer spending, this shift has serious implications.

So, what does this mean for cities?

First, it means understanding who your local economy is really built for. If your main street businesses, public spaces, or commercial districts are still structured around consumer behavior from a decade ago, you may be out of alignment with the current drivers of demand.

Second, it means recognizing that demographic diversity must be paired with generational diversity in planning and investment. The experience economy and the value economy can coexist, but they require different kinds of infrastructure, different regulatory flexibility, and different types of support for small business growth.

Third, it means using data and insights to proactively manage these shifts. Local economic development isn’t about guessing who your community should attract; it’s about understanding who is already here, what they need, and where new opportunities lie. This is especially important in smaller cities, where economic development staff may be minimal or nonexistent, but the consequences of misalignment can be more deeply felt.

As we work with cities across the country, we see that this kind of insight often doesn’t come from legacy planning documents or static demographic reports. It comes from watching behavior patterns, comparing cities, listening to residents and businesses, and translating those into actionable strategies.

When older consumers become more cautious and younger ones become more experience-driven, your local economy doesn’t just shift, it bifurcates. The challenge for local leaders is to make sure their approach to economic development reflects both sides of that equation.

This isn’t about choosing one group over the other. It’s about recognizing the changing mix of motivations that drive growth and making sure your community isn’t betting its future on yesterday’s spending habits. Learn more with Street Economics.