It's possible for HN to be increasing in popularity while decreasing in # of submissions. For instance, if more users are coming to the site, the site is growing in popularity. If the X percent of users who normally submit the most frequently are decreasing their submission rates, submissions will go down despite the user growth.
Of course, this scenario assumes that # of submissions follows a power law distribution: a small percentage of posters make the majority of submissions. That pattern emerges on many content sites, especially sites with active forms of communal self-moderation. I have no idea if it's the case here, but it seems feasible.
IMO, the quality has degraded due to more people viewing the site, not the submissions. If I get my post on the frontpage of HN I can expect roughly 1,000 hits per hour. This wasn't the case 4 years ago when I first starting lurking here.
There are two problems with this:
1. More people (of poor quality) upvoting stories that attract the most attention (link bait, stories that aren't relevant, etc)
2. More people (of poor quality) upvoting comments that are not relevant to the discussion.
No graph will be able to chart this - it's purely subjective.
Does that graph include comments under "submissions", or only stories? I bet the latter. There are only so many conceivably-appropriate-for-HN stories out there, and many of the rest get taken out as spam.
If the number of comments, on the other hand, hadn't gone up since 2012, I'd be shocked.
Number of HN submissions over 3 years: http://i.imgur.com/r9Ayvb1.png
Number of HN comments over 3 years: http://i.imgur.com/4FwglA8.png