Business conditions worsened last month at the fastest pace since the height of the Asian financial crisis three years ago, according to NTC Research.
The company's Hong Kong Purchasing Managers' Index fell to 42.7 last month from 42.9 in August and from 48.1 in April.
A rating below 50 signifies an economic contraction.
The index is based on data collected from companies in manufacturing, services, retail and construction sectors.
A fall in orders from all main sectors of the economy contributed to a sharp decline in the index last month, NTC said.
Demand for goods and services from the United States, Europe and Asia fell substantially. This began early last year, and last month's drop in the index was not a direct result of the terrorist attacks in the US, it said.