To help develop this, pick a story that your child likes to read and knows the story. Have the child tell you the story, turning the pages and making up the words. To take it to the next level, have them use puppets to tell the story. Don't have enough puppets at home? Check out the library's collection. The bin by the board books contains a variety of puppets for you to check out, just like books, for three weeks. This is a big collection that checks out a lot, so if you're looking for a special puppet*, just let us know and we can request it for you (just like a book!). Check out a full list here.
*I'm particularly fond of the bird with the worm.