Hong Kong's economy has had its weakest growth in a decade according to new statistics from the Hong Kong SAR government, showing the economy only grew by 0.6 percent in the second quarter. A plunge in retail sales in July increases the city's risks of falling into a recession.

"It's certainly a risk of recession, and in leading data like retail sales you can see a huge slowdown in investment so there's certainly risk the economy as a whole will fall into a proper recession,” said Ranko Berich, Head of Market Analysis with Monex Europe.

Retail sales in Hong Kong fell 11.4 percent in July, a bigger decline than the previous month's 6.7-percent drop. According to Bloomberg Economics, GDP data for the third quarter is expected to confirm that the city is in a technical recession. 

"Retail sales contracted more than 11.4 percent year on year in July, and looking in the details of that number you can really see a slowdown in tourists spending. So for example, jewelry sales which is a good proxy for the spending of [Chinese mainland] tourists in Hong Kong fell by more than 24 percent year on year in July, so the economy as a whole is slowing not only because a slower consumer spending from tourists and so on but also lower investment for business due to the uncertainties created by the protest and a risk of a crackdown from mainland authorities," said Berich.

According to analysts, visitor arrivals in July fell 4.8 percent, reversing June's 8.5-percent rise. The number of visitors from the Chinese mainland also reversed a previous gain to fall 5.5 percent in July. The drop became severe right after the protests in Hong Kong International Airport in August. Analysts also say retail sales could be a function of observing consumer confidence on a whole because of wider regional factors, and also whether the protests escalate or there is some hope of a resolution.