Record numbers of young adults living at home with their parents are helping drive the boom for luxury goods in the U.S. and U.K., according to Morgan Stanley.

Recent U.S. Census data shows that nearly half of all young adults ages 18 to 29 are living with their parents—the highest level since 1940.

Analysts led by Edouard Aubin at Morgan Stanley said the trend benefits discretionary spending and is partly responsible for the surge in popularity of handbags, watches and jewelry. 

“When young adults free up their budget for daily necessities (e.g. rent and grocery), they simply have more disposable income to be allocated to discretionary spending,” the Morgan Stanley report said.

The U.S. overtook China last year as the top destination for luxury Swiss watches as Americans rediscovered a passion for mechanical timepieces. The U.S. market has also driven higher sales for luxury producers including Cartier owner Richemont as well as Tiffany and Bulgari-owner LVMH.

More young people are living at home to save money as rental costs increase, as well as enrolling in higher education programs and delaying getting married, keeping them with their parents for longer.

“We see it as fundamentally positive for the industry,” the Morgan Stanley analysts wrote in the report.

Morgan Stanley sees a similar trend in the U.K. where the share of 15 to 34-year-olds living with their parents has climbed to 42% from about 35% in 1999.

Richemont, which in addition to Cartier, owns watch brands Vacheron Constantin and IWC, reported a 22% increase in sales growth in the Americas in the first half of the year. Even higher growth in Europe was driven, in part, by U.S. tourists taking advantage of the strong dollar against the euro and British pound.

This article was provided by Bloomberg News.