Just curious, how do you know that the jacket is too big in the body from that picture? I have one hand up that's causing the side to 'puff' up. I guess I see what you're saying, i.e. that it's making my hips look wider. I think the pockets look even bigger than they are because they don't have a 'flap cap'.
I'm with stiches, it looks big through the body. Raising your arm that little bit shouldn't make it flop all over the place. With the jacket buttoned, pull it at the button away from your body. Does it pull out more than a fist size?